A use variance is arguably one of the most difficult zoning approvals to obtain and is rarely granted. Petitioners in 54 Marion Ave., LLC v. City of Saratoga Springs, 2018 N.Y. Slip Op. 04611, 162 A.D.3d 1341 (3d Dep’t 2018), commenced a hybrid proceeding/action to challenge and annul a determination of the Zoning Board of Appeals (“ZBA“) of City of Saratoga Spring (“City”) to deny a use variance application to allow commercial use of residential property and for Section 1983 damages based upon the theory of regulatory taking. The Respondents moved to dismiss and the Supreme Court, Saratoga County (“Motion Court“), granted the motion. Petitioners appealed and the Appellate Division, Third Department (“Appeals Court“), reversed in part and affirmed in part, and found hardship which was not self-created.
Petitioner 54 Marion Avenue, LLC (“Owner“) owns a vacant parcel of real property situated in the City’s Urban Residential-2 District, where single-family residences are permitted as of right, where other uses are allowed with a special use permit and site plan review and where commercial uses are generally prohibited. Petitioner Maple Shade Corners, LLC (“Purchaser“) contracted to purchase the subject parcel contingent upon obtaining a use variance to allow a dental practice to operate thereon. An application was made to the ZBA for a use variance to allow the dental practice in Urban Residential-2 and the ZBA denied the application because the alleged hardship was not unique and was self-created. Petitioners brought this litigation to annul the ZBA’s decision denying the use variance and to seek damages for regulatory taking. Respondents moved to dismiss based upon Petitioners’ failure to state a cause of action, which the Motion Court granted.
In order to qualify for a use variance, an applicant must meet the very difficult task of demonstrating the following four elements: (i) it cannot realize a reasonable return if the property is used for a permitted purpose; (ii) the hardship results from unique characteristics of the property; (iii) the proposed use will not alter the essential character of the neighborhood; and (iv) the hardship has not been self-created. The ZBA found that the Petitioner met the first and third elements, but failed to meet the second and fourth elements – that the hardship was unique and was not self-created. On appeal, the Appeals Court reversed the Motion Court as to the hardship issues.
In its review of the ZBA’s determination, the Appeals Court noted that the subject property lies next to the intersection of a major thoroughfare and a side street. Petitioners substantiated their claim that this location imposes a unique financial hardship because of the commercial development and increasing traffic along the thoroughfare (occurring over the prior 30 years) with statements from prior owners and real estate professionals. These statements recounted previous failed attempts to sell the subject parcel for permitted residential use and opined its location rendered it unmarketable for residential use, among other things. In light of this proof, the Appeals Court found that the need for a use variance was not self-created because it only arose after the property was acquired and due to the gradual shift in the character of the area, which rendered the residential use requirement onerous and obsolete. Moreover, the Appeals Court noted that even the ZBA agreed the location of the parcel on the corner might impact its value; the ZBA’s ultimate conclusion that the financial hardship was not unique was contrary to that observation. On a motion to dismiss, Courts must accept the allegations presented as true and, based upon the foregoing, the Appeals Court held that Petitioners set forth a viable challenge to the ZBA’s denial and reversed the Motion Court.
With respect to the regulatory taking claim, the Appellate Division affirmed dismissal. In order for a taking claim to be ripe, a claimant must demonstrate that it has received a final decision regarding the application of the challenged regulations to the subject property from the governing entity and that it has sought compensation through the appropriate state procedures. Although the ZBA’s denial of the use variance satisfied the final decision prong, the Appeals Court found that there is no indication the Petitioners sought compensation under State law.